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Regional grants: are they worth it?

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  • Colin Wren

Abstract

Regional grants have recently come under scrutiny and are controversial. Some estimates put the employment effect of these grants at no more than 6,000 jobs in the first half of the 1990s, against expenditure of £500 million. Other aspects of the grants are questioned, such as their ability to attract foreign direct investment and their effect on productivity. This paper reviews these issues, focusing on the recent evidence for the Regional Selective Assistance scheme. It describes the nature and difficulties involved in policy evaluation, and finds that differences over the employment effect of the grants result from possible biases induced by the evaluation methodology and from differences in the job measure used. Overall, the paper argues that the regional grants are cost-effective in employment terms, but that expenditure is small relative to the scale of the problem, so that an expansion of the grants may be desirable.

Suggested Citation

  • Colin Wren, 2005. "Regional grants: are they worth it?," Fiscal Studies, Institute for Fiscal Studies, vol. 26(2), pages 245-275, June.
    • Handle: RePEc:ifs:fistud:v:26:y:2005:i:2:p:245-275
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    Citations

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    Cited by:

    1. Michelle Gilmartin & David Learmouth & J Kim Swales & Peter McGregor & Karen Turner, 2013. "Regional Policy Spillovers: The National Impact of Demand-Side Policy in an Interregional Model of the UK Economy," Environment and Planning A, , vol. 45(4), pages 814-834, April.
    2. Richard Harris & John Moffat, 2020. "The impact of product subsidies on plant‐level total factor productivity in Britain, 1997–2014," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(4), pages 387-403, September.
    3. Richard Harris, 2011. "Models Of Regional Growth: Past, Present And Future," Journal of Economic Surveys, Wiley Blackwell, vol. 25(5), pages 913-951, December.
    4. Gustavsson Tingvall, Patrik & Videnord, Josefin, 2017. "Regional Effects of Publicly Sponsored R&D Grants on SME Performance," Ratio Working Papers 289, The Ratio Institute.
    5. Chiara Criscuolo & Ralf Martin & Henry G. Overman & John Van Reenen, 2019. "Some Causal Effects of an Industrial Policy," American Economic Review, American Economic Association, vol. 109(1), pages 48-85, January.
    6. Criscuolo, Chiara & Martin, Ralf & Overman, Henry & Van Reenen, John, 2012. "The Causal Effects of an Industrial Policy," IZA Discussion Papers 6323, Institute of Labor Economics (IZA).
    7. Alvaro Cuervo-Cazurra & Bernardo Silva-Rêgo & Ariane Figueira, 2022. "Financial and fiscal incentives and inward foreign direct investment: When quality institutions substitute incentives," Journal of International Business Policy, Palgrave Macmillan, vol. 5(4), pages 417-443, December.
    8. Andy Pike & Andrés Rodríguez-Pose & John Tomaney & Gianpiero Torrisi & Vassilis Tselios, 2010. "In Search of the 'Economic Dividend' of Devolution: Spatial Disparities, Spatial Economic Policy and Decentralisation in the UK," SERC Discussion Papers 0062, Centre for Economic Performance, LSE.
    9. Simona Bratkova & Miroslav Sipikal & Valeria Nemethova, 2021. "Impact of Deadweight Effect on the Performance of Supported Firms," RAIS Conference Proceedings 2021 0014, Research Association for Interdisciplinary Studies.
    10. Marta Gancarczyk, 2009. "Ocena publicznej i prywatnej formy świadczenia usług dla przedsiębiorców w Małopolsce," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 5-6, pages 91-111.
    11. Jindrich SPICKA & Zdenka NAGLOVA & Martin GURTLER, 2017. "Effects of the investment support in the Czech meat processing industry," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 63(8), pages 356-369.
    12. Andy Pike & Andrés Rodríguez-Pose & John Tomaney & Gianpiero Torrisi & Vassilis Tselios, 2012. "In Search of the ‘Economic Dividend’ of Devolution: Spatial Disparities, Spatial Economic Policy, and Decentralisation in the UK," Environment and Planning C, , vol. 30(1), pages 10-28, February.
    13. Ankarhem, Mattias & Daunfeldt, Sven-Olov & Quoreshi, Shahiduzzaman & Rudholm, Niklas, 2009. "Do Regional Investment Grants Improve Firm Performance? Evidence from Sweden," Ratio Working Papers 137, The Ratio Institute.
    14. Jones, Jonathan & Wren, Colin, 2008. "Re-investment and the survival of foreign-owned plants," LSE Research Online Documents on Economics 33138, London School of Economics and Political Science, LSE Library.
    15. Jonathan Jones & Colin Wren, 2008. "FDI Location Across British Regions and Inward Investment Policy," SERC Discussion Papers 0013, Centre for Economic Performance, LSE.
    16. Jonathan Jones & Colin Wren, 2008. "Re-Investment and the Survival of Foreign-Owned Plants," SERC Discussion Papers 0003, Centre for Economic Performance, LSE.
    17. Riccardo Crescenzi & Fabrizio De Filippis & Fabio Pierangeli, 2015. "In Tandem for Cohesion? Synergies and Conflicts between Regional and Agricultural Policies of the European Union," Regional Studies, Taylor & Francis Journals, vol. 49(4), pages 681-704, April.
    18. Marius Brülhart & Helen Simpson, 2018. "Agglomeration economies, taxable rents and government capture: evidence from a place-based policy," Journal of Economic Geography, Oxford University Press, vol. 18(2), pages 319-353.
    19. Wren, Colin & Jones, Jonathan, 2009. "Re-investment and the survival of foreign-owned plants," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 214-223, March.
    20. Colin Wren & Jonathan Jones, 2011. "Assessing The Regional Impact Of Grants On Fdi Location: Evidence From U.K. Regional Policy, 1985–2005," Journal of Regional Science, Wiley Blackwell, vol. 51(3), pages 497-517, August.
    21. J Kim Swales, 2010. "The Relative Efficiency of Automatic and Discretionary Regional Aid," Environment and Planning A, , vol. 42(2), pages 434-451, February.
    22. Jones, Jonathan & Wren, Colin, 2008. "FDI location across British regions and inward investment policy," LSE Research Online Documents on Economics 33204, London School of Economics and Political Science, LSE Library.
    23. Neil Rollings, 2007. "British business history: A review of the periodical literature for 2005," Business History, Taylor & Francis Journals, vol. 49(3), pages 271-292.
    24. Zdeňka Náglová, 2018. "Investment Subsidies in the Meat Industry and Their Impact on Business Economics," Central European Business Review, Prague University of Economics and Business, vol. 2018(1), pages 37-45.
    25. Jones, Jonathan & Wren, Colin, 2009. "The dynamics of FDI location: a markov analysis for British regions," LSE Research Online Documents on Economics 33497, London School of Economics and Political Science, LSE Library.

    More about this item

    JEL classification:

    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General

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